Karnataka reduces tax on ATF, giving relief to airlines

December 23, 2021

In a big relief to airlines, the state government on Wednesday reduced the tax on Aviation Turbine Fuel (ATF) from the existing 28% to 18%, with effect from January 1, 2022.
A notification slashing the tax rate was issued by the Finance Department. The reduction could give a boost to airlines struggling under the pandemic-imposed restrictions. Last week, the Indian Oil Corporation (IOC) had reduced ATF prices, and this could further help airlines recover part of their losses.
The reduced ATF price and taxes are also expected to help airlines operating out of the Kempegowda International Airport (KIA), currently the third busiest in the country. There has been widespread demand from airlines and other stakeholders in the aviation industry to reduce the tax. Seven states have already reduced the VAT to under 4%.
Union Civil Aviation Minister Jyotiraditya Scindia had recently urged 22 state governments to reduce the VAT to a range of 1-4% and thus give an impetus to the struggling aviation industry.
Currently, Karnataka levies three kinds of rates on ATF. While the tax is 1% for flights under the Regional Connectivity Scheme, airplanes weighing under 40,000 kg are levied 5% and all other aircraft are under the 28% tax category.
The Kanara Chamber of Commerce and Industry (KCCI) had recently sought a reduction to as low as 1%.

In a letter to Chief Minister Basavaraj Bommai, KCCI president Isaac Vas had drawn attention to such concessions extended to airlines by other state governments, particularly with the opening of new airports around the Mangaluru International Airport.
Air passengers, most of whom have already booked their tickets for Christmas and New Year, will not benefit as the reduced tax is effective only after January 1, 2022.